China's mobile game developers look for best markets

Although based in China and a maker of hit games, app developer Haypi has largely ignored its home market.
Instead, the Chinese company's forte is building games for U.S. and European users.

"Our games don't have Chinese characteristics, but instead use European art styles," said Haypi CEO Ren Gang in
an interview. In fact, the strong emphasis on European culture has left many users unaware that the company is
Chinese. "A lot of users have mistakenly believed we are German."

Haypi is just one of the many Chinese mobile game developers in the country seeking to cash in on the popularity
of smartphones and tablets by building mobile apps. But to make that cash, developers often have to choose between
developing products for overseas markets and focusing on China, a country where app downloads are soaring, but
where users are less accustomed to paying for them.

China is ranked second for number of downloads on Apple's App Store, right behind the U.S., according to
analytics firm App Annie. The country has
tripled the number of App Store downloads from a year ago.

But despite the high download count, Chinese users generally only download free content, rather than purchasing
apps. This means the country generates an average of about US$0.03 per App Store download, when comparing gross
revenue against total downloads. The U.S., in comparison, generates an average of US$0.28 per download, while Japan
generates US$0.40.

"Credit card adoption in China is still extremely low, so app purchases are less," said Oliver Lo, chief
marketing officer for App Annie. China also has a prevalence of pirated apps, where developers will copy an app and
make it available for free, he added.

This has been part of the reason why app developer Haypi has focused on the U.S. and European markets, where
users are more willing to pay for in-game purchases, according to Ren. The company's strategy has so far been a
success, leading Haypi to produce two hit multiplayer online games for Apple's App Store that have ranked as top
grossing products. About 70 percent of Haypi's users are from the U.S. and Europe.

"I think it's easier to make money overseas. There is still a lot of competition, but the market is also more
regulated," he said. Haypi originally developed PC games for overseas markets starting in 2000, and avoided the
Chinese market due to the rampant piracy in
the country.

Surprisingly, the company feels more comfortable developing games for Western markets, given that its developers
enjoy playing English-language titles such as World of Warcraft and console-based videogames. But to better
localize the games for foreign users, Haypi has hired staff in the U.S. and Europe to do English translations for
the game and to create the product art design.

Other app developers, however, are finding more success in China than they did overseas. RedAtoms previously
designed English PC and social networking games including "City of Wonder", available on Facebook and for Apple's
iOS.

While the game performed satisfactorily, it struggled to maintain a high ranking, said RedAtoms vice president
Andrew Chang said. The game also wasn't received as well in the China. "Chinese people are not as enthusiastic
about city building games," he said.

Last year, the company decided to switch gears and focus on the Chinese market, given the growth in smartphone
use and the lack of engaging apps. The results have been promising, with the company producing three hit Chinese
games for Apple's iOS.

"A lot of Chinese companies wanted to go overseas. But they found it was hard to make money and realized it
would not be easy," Chang said. "The founders, or co-founders of these companies could not speak English or
Japanese, and it was very difficult for them to compete with the local publishers."

Although Chinese users are less prone to buying apps, RedAtoms has found success in using a "freemium" model to
generate revenue out of the country's gamers. This works by making the product free, but adding virtual currency or
other in-game features that can be purchased by the players for a price. The model works especially well for the
company's "Three Kingdoms Now" game, an online role-playing title set in a historic period popular in the
country.

Chukong, also known as Punchbox, is another Chinese app developer, which has enjoyed some success overseas. The
company was the maker of Fishing Joy, a casual app game that at various points has been a top downloaded game on
Apple's App Store.

The success of the game was very unexpected, said Chen Haozhi, CEO of Chukong. "We felt the game's quality was
high. It also didn't seem like the game was made by a Chinese group," he said, when asked about why the game
succeeded.

But even as Chukong's Fishing Joy attracted users abroad, about 80 percent of the company's users are from China
due to the release of its other mobile games, most of which are played by Android users. Like RedAtoms, Chukong is
using a "freemium" model for some of its game in order to generate revenues.

"In China, I feel there isn't a lack of people who are willing to pay, there is just a lack of products people
are willing to accept," he said.

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